Startup management is a challenge. Keeping it open can be even more difficult. Business owners need to understand the finances of their business inside and out if they are to survive. Before getting started, look at these key insights.

Always Keep Your Personal and Business Finances Separate

It is very easy for a small business owner to entangle their own finances with their business. Small business owners need to be conscientious about keeping everything separate or they could find themselves in a lot of danger. Though a business may be your livelihood, taking the appropriate steps to protect yourself and your company will prevent issues down the line. If you fall into financial trouble or your business does, the other entity will not be impacted.

Personally guaranteed loans are one way that owners may end up entangling their own funds with the business — as are unchecked draws taken by owners against the company’s profits. There are also some more subtle ways it can occur. Either way it becomes difficult to control the company’s success and ensure that it is able to stand on its own. If properly separated, a business can fail without substantial adverse impact to an individual. If not properly separated, it could bankrupt its owner.

Make Sure to Educate Yourself Appropriately

Most business owners understand their product or service very well. But that doesn’t necessarily mean that they understand the intricacies of owning and operating a business — this is an entirely separate topic. It’s important for business owners to invest in themselves, their business, and their future by taking seminars and classes and keeping up to date on the factors impacting small business owners in their area.

If you don’t know where to start, the Small Business Association often has local resources available. There are also classes at local universities and online training courses. At minimum, small business owners need to understand basic accounting and how to read their financial statements. This is what will tell them whether or not their business is truly a success.

It’s Easier to Reduce Costs than Increase Income

Cost management is one of the most important aspect of managing a business. 82% of small businesses that fail do so because they run out of cash. But many companies mistakenly try to manage their cash by improving their income, which may not always be possible to do in either a fast or stable way. Reducing expenses, on the other hand, has the same ultimate impact while also being far easier to do. Expenses are entirely under control of the business, whereas income can be difficult obtain and to predict.

In general, businesses have two costs: fixed and variable. Fixed costs are things such as rent — but “fixed” doesn’t mean that they cannot be negotiated or improved upon. Every time a contract comes up for consideration, a business should seek to improve cost or value.

There are additionally variable operating costs, such as travel. Carefully tracked and reduced — technology often helps. Technology can provide for optimization of an organization’s logistics, tracking of expenditures, and better collaboration.

Create and Analyze Your Leading Metrics for Success

How can you tell that your business is doing well? The best way is to define success based on a specific metric or set of metrics. It may not just be as simple as ROI; you might also measure success based on customer acquisition, cost per customer, or customer retention. All of these things can tell you whether your current strategy is working.

Accounting and customer relationship solutions are an excellent way for a business to track their strategies and to optimize their organization. These solutions make it easier for businesses to find the information they need without having to invest a lot of time.

Choose the Right Accounting Software

A business hinges upon the accuracy of its accounting — and a lot of the company’s accounting will rely upon the technology that it employs. Cloud-based accounting software is advantageous in a few ways: access your information from anywhere, have virtually unlimited resources, and scale upwards as the company grows. Further, these solutions are usually more affordable than other options, and they are intuitive and easy to use.

The more a business owner understands about the finances of their small business, the better their odds of success will be. By following the above principles, they should be able to reduce risk and manage their cash flow with greater predictability.